(Kitco News) - Physical demand for gold and silvercontinues to provide critical support for the precious metals as India sees record demand for the precious metal after two years of COVID-19 disruptions.
Oct. 24 marked Diwali, the Hindu festival of light that celebrates good luck, prosperity and positivity. Gold, a symbol of wealth and prosperity, sees significant demand during the five days of celebrations. This year according to preliminary reports, demand for gold and silver hit record highs this past weekend.
"The Indian gold industry has fully recovered from the Covid crisis as the demand for gold in India has reached its highest level! India's gold demand grew by up to 80% in the domestic market in the July-September quarter following a strong pick-up in economic activity and improved consumer demand," Pankaj Arora, National President of the All India Jewelers and Goldsmith Federation (AIJGF), said in a statement.
For some analysts, the strong demand during Diwali comes as no surprise. During the London Bullion Market Association annual precious metals conference, many analysts noted that Indian consumers currently have an insatiable appetite for silver.
According to comments during the conference, analysts expect silver imports into India to hit a record of more than 10,000 tonnes this year. Demand for silver has been so strong and premiums so high that businesses have paid to have the metal transported by plane into the country.
Nicky Shiels, head of metals strategy at MKS PAMP, said in a report Wednesday that gold was trading around $1,650 an ounce on Diwali, holding near its lowest level in two years. "Given that relatively cheaper price, physical demand for Gold was the most robust we've seen over the last couple of years," she said.
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However, she added that global markets hadn't felt the impact of record demand as many Indian bullion shops were well stocked and prepared to meet the gold demand leading up to the festival.
"Gold floated up only +0.4% in the past month into this year's Diwali. That mildly 'outperformed' the historical trend in gold, on average, since 1999," she said.
Although gold and silver continue to see solid physical demand, many analysts note that investment demand continues to struggle. Commodity analysts at TD Securities said that with Diwali winding down, a drop in physical demand could push prices lower through year-end.
